This question was given a new twist on Friday, October 25. On that day, the Securities Appellate Tribunal directed the watchdog of the country's capital markets, the Securities and Exchange Board of India, to examine whether the Gujarat Ambuja group had gained management control over ACC after a controversial acquisition of 14.45 per cent of the company's shares from the Tata group.

The change in the shareholding pattern of ACC had raised a host of complex issues about the relative role and responsibility of those who control the management of a company and those who are its promoters.

That these issues remain unresolved and need to be debated not merely by legal experts, but also by industry associations and chambers of commerce goes without saying.

There is an element of irony in such a proposition for ACC is currently headed by Tarun Das, Director General, Confederation of Indian Industry - arguably the largest and most influential business lobby of its kind.

While wearing his second hat as Chairman, ACC, who does Das really represent? The individuals controlling the Gujarat Ambuja group? Or the Tatas?

The two key questions that need to be raised in this context are as follows: Can a group of individuals or corporate entities be the single largest stakeholder in a company and yet not control its management?

Alternatively, can those who control the management of a company not hold any - or a very small proportion - of that company's equity shares?

If one accepts the view expressed by Sebi in July 2001, the answer to both these questions would firmly be in the affirmative.

However, fifteen months later, the one-person SAT comprising C Achuthan has rejected Sebi's view in this regard and thrown the ball back in the court of the market regulator.

The tribunal order categorically directs Sebi to 'properly investigate' whether or not the Gujarat Ambuja group acquired managerial control over ACC after picking up the 14.45 per cent chunk of the company's shares that was earlier held by the Tata group.

How large should be the shareholding stake of a promoter or a promoting group before the concerned promoter/group is able to control a company's management? There is no clear answer to this question.

This proportion depends on a host of factors including the role and attitude of other large shareholders, including public financial institutions as well as the extent of public shareholding in a corporate body.

This shareholding proportion has varied over time, from country to country and from situation to situation.

In the mid-1980s, the London-based Non-Resident Indian tycoon Swraj Paul had sought to control the management of two prominent Delhi-based companies, Escorts Limited and DCM (formerly Delhi Cloth Mills) Limited by picking up their shares from the stock market.

Paul apparently made his bid to control these companies with the tacit support of the then prime minister Indira Gandhi.

Dubbed a 'takeover tycoon' by the media, he faced a major obstacle after government-run financial institutions like the Life Insurance Corporation opposed him and the two companies refused to register the transfer of shares in his name.

The threatened promoters of the two companies - the Nanda and Shri Ram families - sought to entangle Paul in a slew of lawsuits.

What made matters worse for the NRI was that the country's rulers apparently also changed their positions. After Indira Gandhi's son Rajiv Gandhi became prime minister, he evidently became reluctant to "destabilise" the managements of "well-run" companies like Escorts and DCM.

Paul had to eventually bite the dust and he subsequently complained bitterly about his experience in his published autobiography. He claimed the promoters of the companies he had tried to take over had given ordinary shareholders a raw deal and that they did not believe in corporate democracy.

Though he failed to fulfil his dream of controlling Escorts and DCM, Swraj Paul was successful in highlighting how particular families were able to exercise managerial control over large corporate entities despite holding a minuscule proportion of the concerned company's shares.

What indeed was 'private' about India's private sector companies, the question was raised. After all, those who controlled the management of these firms held a niggardly portion of the shares while the bulk of the term loans and working capital to run these companies had come from government-controlled financial institutions and nationalised commercial banks.

Until not very long ago, it used to be jocularly remarked that members of the Birla family held more shares in the Tata Iron and Steel Company than those belonging to the Tata family!

Notwithstanding these rather well publicised episodes, the issues relating to the relative role and responsibility of a company's promoters and its controllers continue to remain rather fuzzy.

The confusion was compounded by Sebi's July 2001 judgement in the case of the change in the pattern of shareholding in ACC.

In December 1999, the Tata group sold half its 14.45 per cent stake in ACC to a wholly owned subsidiary of Gujarat Ambuja Cements Limited for a price of Rs 455 crore (Rs 4.55 billion).

The other half of the Tata group's stake in ACC was subsequently acquired by the Gujarat Ambuja group.

The acquisition became contentious because takeover regulations seek to draw a distinction between a company's 'promoters' and 'persons in control' of a company's management.

Even after selling its stake to the Gujarat Ambuja group, the Tatas officially remained 'in control' of ACC, while the Gujarat Ambuja group promoted by the Seksarias claimed it was ACC's 'strategic partner' with a representation of two members on the company's 16-member board of directors.

The issue of whether or not there had been a change in management control at ACC was debated for more than a year and a half.

A group of ACC investors, including a firm called Doshi & Co, approached the high court at Mumbai arguing that the intention of the Gujarat Ambuja group to acquire the shares of ACC without making an open offer to other investors was tantamount to a change in management and hence, violated the provisions of the Sebi (Substantial Acquisition of Shares and Takeovers) Regulations, 1997, popularly known as the 'takeover code.'

The court referred the dispute to Sebi stating that the regulator of the capital markets was the 'competent authority' to deal with the dispute. In March 2001, the then SEBI Chairman D R Mehta heard the different petitioners and complainants in the case and his quasi-judicial order in the case came in late-July.

According to the definition of the word 'promoter' in Sebi's takeover regulations, a person not in control of a company can still be considered to be a promoter if he has been so named and described in the company's original offer document for shares.

In case the promoters are not persons in control of the management and are holding shares less than the threshold limit of 15 per cent of the total equity of the company provided in the regulations, acquisition of shares held by such promoters should not trigger an open offer - namely an offer to all shareholders to purchase their shares at the price at which such shares were offered to the promoters.

In this instance, the Gujarat Ambuja group had acquired ACC shares from the Tata group at a price of Rs 370 a share at a time when the market value of the scrip was in the region of Rs 110.

Not surprisingly, many small investors felt aggrieved that they had been deprived of the opportunity of selling their holdings in ACC at such an attractive price on the occasion.

Over the decades, the bosses of the Tata group have had a fluctuating relationship with ACC.

During the days of the licence-control raj in the 1970s and 1980s, the group had formally distanced itself from the management of ACC. During the 1990s, however, the Tata bosses changed their position and declared that ACC was very much an integral part of the group.

Even after the Gujarat Ambuja group acquired 14.45 per cent of the shares of ACC, the Tatas claimed it was controlling the company's management although the managing director of Gujarat Ambuja Cement Limited, Narottam Seksaria, and its director, A L Kapur, had been invited to join ACC's board of directors.

Seksaria, who happened to be ACC's non-executive vice-chairman, had been quoted by journalists as claiming that there had been a 'strategic alliance' between GACL and ACC.

Sebi's former chairman D R Mehta took the view that since the Tata group was holding less than 15 per cent of the shares of ACC, neither had the trigger limit been touched nor had there been a change in management control.

The regulatory body had to nevertheless adjudicate on the dispute because it was directed to do so by the Mumbai high court.

It is understood that Sebi sought the opinion of Attorney General of India Soli Sorabjee in his private capacity as a lawyer on this matter.

He is said to have concurred with the view of the market watchdog that a distinction should be drawn between a promoter and a person controlling the management of a company.

Such a fine distinction was, however, not evident to many observers of the country's corporate scene.

Now, more than a year later, the SAT's Achuthan has asked Sebi to examine evidence on the issue all over again.

The tribunal pointed out that Sebi had come to the conclusion that management control over ACC had not changed on the basis of submissions made on behalf of the Gujarat Ambuja group, the Tata group and ACC itself.

Such a procedure, the SAT argued, had its obvious limitations since it would be 'futile' to expect these interested parties 'to voluntarily furnish any material which would not support their contention.'

Another point the tribunal emphasised was that even if the equity stake transferred was less than 15 per cent (in this case, 14.45 per cent), any change in management control would automatically trigger the open offer provision of the takeover code.

Achuthan's order criticises the former Sebi chief for not investigating the evidence properly - Mehta allegedly did not ascertain whether the Gujarat Ambuja group was in a position to effectively exercise managerial control over ACC.

The SAT, however, disagreed with the contention that the Gujarat Ambuja group was in a position to exercise voting rights in excess of 15 per cent in ACC because 8.4 per cent of the company's shares had been frozen by a special court of law - this stake had been held by the late scam-scarred broker Harshad Mehta and his associates.

The last has not been heard about who really controls the management of the country's largest cement company.